Groupon shares pop 10% after unusually positive quarter

Is the sinking Groupon ship recovering? Don't jinx it!

Could Groupon be seeing a legitimate turnaround? The company's future is looking bright after it revealed better than expected Q1 earnings Wednesday evening. Shares were up 10.2% to $6.15 Thursday morning. 

"One of the interesting dynamics of the GRPN story is the increasing percentage of its business on mobile," wrote Sterne Agee analyst Arvind Bhatia, in a research note. "Unlike many Internet companies that are negatively impacted by the transition from desktop to mobile, GRPN’s business on mobile is a natural extension of its desktop business."

Bhatia's price target is set at $9.

"We’re encouraged by the increasing share of North American Local Deals volume (~55%) coming from the marketplace, though the international local business continues to decline Y/Y, which could continue to weigh on profitability through 2013," wrote J.P. Morgan analyst Doug Anmuth in a research note. 

Groupon's Non-GAAP operating income (excluding stock compensation) came in at $51.2 million, or $0.03 a share on revenue of $601.4 million. Street consensus called for non-GAAP operating income of $29 million on revenue of $591.3 million.

While revenue was up 8% over last year ($559.3 million), gross profit was down to $379 million from $438.9 million in the same quarter a year ago.

"We are encouraged by our results, as our local revenues accelerated and our margins improved over the prior quarter," said Eric Lefkofsky, Chairman and co-CEO of Groupon, in a statement. "We had record mobile performance as 45% of our North American transactions came from mobile in March, and more than seven million people downloaded our apps in the quarter."

In case you missed that—nearly half of all North American Groupon transactions are now coming from mobile. That’s up from 30% this time last year.

It’s not all sunshine and roses yet. After one year on the job, Groupon Goods VP Faisal Masud will leave the company next week to lead Staples’ online and digital business. That’s pretty dismal news, considering the fact that Groupon is relying more and more on its Goods business to keep up its momentum as its coupon businesses slows down.

Masud follows former Groupon CEO Andrew Mason, who was unceremoniously sacked in March following the company’s dreary Q4 2012 earnings report, which caused share prices to drop 20%.

Additionally, while North American sales were up 37%, international sales were down 18%. But as Sterne Agee analyst Arvind Bhatia notes, the international segment is key to Groupon’s turnaround.

“The company is in the early stages of introducing ‘SmartDeals’ in the international markets. In the U.S., SmartDeals resulted in a 30% lift in transactions in the past. SmartDeals were recently added in the U.K. market and will be added in other international markets in the upcoming quarters. In addition, technology automation is expected to lower operating costs and boost profitability,” wrote Bhatia in a research note.

Groupon is offering guidance of $575-$625 million in revenue in the second quarter, with operating income of $20-$40 million. 

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